Dallas Fed Says 11th District Banks Performing Well, with Some Stress

According to the fourth quarter issue of Southwest Economy, published by the ""Federal Reserve Bank of Dallas"":http://www.dallasfed.org/index.cfm, banks in the Eleventh Federal Reserve District are performing well, although signs of stress are still apparent.

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The report states that about 30 percent of banks in the district, which includes Texas, northern Louisiana and southern New Mexico, find that even after restructuring troubled loans to give borrowers easier terms, many of the loans become delinquent again.

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A lender might agree to restructure a loan when a borrower's financial situation has changed, making repayment under the original terms extremely difficult or impossible.

Loans can be restructured by reducing the amount of interest or principal payments.

At the end of 2005, restructured business loans in the Eleventh District sat around $100 million, with 18 percent delinquent. At the end of September 2010, the banks in this district reported more than $1.2 billion in restructured business loans, with $573 million, or 48 percent, having trouble.

In addition to this, banks also reported in September a total of $1.6 billion in restructured residential loans, with $592 million nonperforming.

Despite seemingly disheartening numbers of delinquencies in restructured loans, the report suggests that the results are in line with historical traditions and attempts a loan restructuring can have a beneficial impact on the broader economy.